Consumers National Bank locked into region

Consumers National Bank is maintaining its local connections while expanding in the region.

By Edd PritchardCantonRep.com staff writer

When the bottom fell out of the banking industry in 2008, Consumers National Bank didn't have to battle the problems its giant competitors faced.

But five years later, the community bank is coping with the backlash.

Regulations created with passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act might have been aimed at the bigger banks, but the new rules affect smaller institutions, too. It's a matter of staying current with the best practices, said Ralph J. Lober II, president and chief executive officer for Consumers National.

The changes have created challenges for the bank, but also might lead to opportunities, Lober said.

HIGHER COSTS

It has become more expensive for banks to do business, he said. There is more scrutiny, and compliance levels are tighter. A loan that Consumers would have made before the collapse in 2008 now requires extensive reviews and more paperwork, as well as time.

To keep up, Consumers hired more employees to complete the paperwork required under the regulations, Lober said.

Still, Consumers finds itself coping with the mistakes that bigger banks made prior to the crisis, Lober said.

OPPORTUNITIES

To a degree, the mistakes also have helped Consumers. During the past two years Consumers has grown by opening branches in the Belden Village area and Hartville.

Consumers went to Hartville because there no longer was a "local" bank, just larger banks from out of town, Lober said. The new branch has taken advantage of customer flight from bigger banks, he said.

The bank also is considering possible growth through acquisitions.

This summer, Consumers generated $10 million by issuing 655,668 shares of stock. Cash is available if a smaller bank — facing the higher costs of regulation — seeks a partner, or if Consumers finds another community where it believes a local bank is needed.

COMMUNITY FOCUS

Lober said Consumers wants to be the bank that people look to in the three-county area — Stark, Carroll and Columbiana — where it operates.

Five Minerva businessmen organized the bank in 1965. Their goal was to help small business owners and farmers with lending and banking needs.

"We're still doing the same thing. We're just doing more of it and in a larger territory," Lober said.

He views Consumers as the banking industry's equivalent of a "first responder" in its 12 markets. The bank has nine lenders, including two focused on agricultural loans, who work with businesses. The lenders — as well as Consumers directors and other executives — work within the community, participate in social groups and community organizations, and get to knew business owners.

"They know what's going on and where the credit needs are," Lober said.

Consumers also strives to keep pace with changes in technology, offering online banking services and other products and conveniences found at larger banks. But as Lober sees it, customers still want a personal touch. Many customers will shop online for accounts and services, but visit the local branch to open an account, he said.

So while Consumers matches the service technology of large banks, it also gives customers access to people, he said. "We will not survive if we don't differentiate — with our service and accessibility — from the big guys."

ECONOMIC REVIVAL

Lober has been with Consumers since 2007 and became president and CEO in 2008. He grew up in Pittsburgh and earned bachelor's and master's degrees from Duquesne University.

Since 2010 he's watched the economy in Consumers' markets change as oil companies began exploring the Utica Shale.

Beginning in 2010 and running through 2012 the bank saw deposits grow nearly 30 percent. Lober believes the growth was from residents who received payments for signing oil and gas drilling leases. The deposits have been flat the past year, but he expects that to change as property owners begin receiving royalty checks.

Drilling has benefited small businesses in the area, Lober said. Restaurants are seeing more customers, and several have remodeled or expanded. Service businesses, trucking companies and welders, along with others, are getting more business. That has some folks asking for loans. "The trick on the loan side is trying to fund out what is short-term growth and what is here to stay," Lober said.

Consumers is one of the growing local companies.

It is working on plans for a new office building to replace the cramped quarters in Minerva. Design work is underway and construction is expected to start next year. The bank hopes to be in its new home, which will be behind the existing building at 614 E. Lincoln Way, by the summer of 2015.

Staying in Minerva was an easy decision. "The board decided we were born here. The commitment is here," Lober said.

When a community loses its local bank, it loses a lot, Lober said. Money that's deposited there goes to a corporation out of town. The bank loses its civic ties. The community loses the people who sponsored programs, Little League teams and civic activities.

The banking industry may have become more efficient through the years, but many banks no longer know the communities they serve, Lober said. "Long term the community suffers," he said.

Consumers intends to stay committed to its region, Lober said. That message was delivered this summer as he and directors met with shareholders to discuss the stock offering. The bank was required to offer the new shares to current shareholders and they responded, buying 97 percent. The remaining stock was bought by new shareholders.

About 1,000 shareholders own Consumers stock, with more than 90 percent living in the region. Lober hopes the investor loyalty continues and extends to younger residents. The investment and their deposits stay in the area and are used here, he said.

"And as much as we can, we buy local," Lober said. "It's just good business."

Reach Edd at 330-580-8484 or edd.pritchard@cantonrep.com

On Twitter: @epritchardREP

COMMUNITY BANKS COVER OHIO

There are 216 community banks spread across Ohio, ranging in size from $14.5 million to more than $2 billion in assets.

Among those, Minerva-based Consumers National Bank ranks as one of the larger operations, with assets topping $300 million.

A big challenge faced by community banks is the perception that all banks are alike, said Robert Palmer, president and chief executive officer with the Community Bankers Association of Ohio.

It takes both large banks and community banks to keep the economy moving, Palmer added.

The differences between a community bank and a large national bank lies in relationships, Palmer said. Community bankers see their customers every day at local businesses, schools and churches, as well as community events. Customers are people and not a number.

"They take a lot of pride in not taking advantage of their customers," Palmer said of community bankers.

Because of their size, community banks face bigger challenges dealing with government regulations.

The Dodd-Frank Wall Street Reform and Consumer Protection Act was drawn up to deal with problems created by larger banks because of lending practices. Community banks did not cause the problems, but they must follow the rules.

"It's almost unbearable financially," Palmer said of the Dodd-Frank regulations. "Regardless of the size, it's still a tremendous expense."